If all that happens, Apple's stock could get cut in half from here, or worse.

Let's look at the numbers:

In the past three years, Apple's free cash flow has grown at an absolutely astounding rate for a company this large:

APPLE FREE CASH FLOW (Cash from operations LESS capital expenditures)

FY 2009: $9 billionFY 2010: $19 billionFY 2011: $33 billion

With the stock at $400, after backing out $83 billion of cash, Apple is trading at about 8X-9X trailing free cash flow. This is a perfectly reasonable multiple for a company with this growth trajectory.

In fact, if Apple's growth rate were very likely to be sustained over the next couple of years, the stock could reasonably trade at a much higher multiple, even 15X-20X. Given Apple's already tremendous size, however, as well as increasing competition, the market is reasonably concluding that the company is unlikely to maintain this growth rate.

If Apple's growth hit a wall, meanwhile, there would be plenty of downside to this free-cash flow multiple.

Dell, a hardware competitor that is not growing, generates about $5 billion of free cash flow per year. Excluding Dell's cash, the company's stock trades at about 3X this free-cash-flow. So 3X trailing free cash flow is probably a good "floor" multiple if Apple's growth were to hit a wall.

If Apple's stock traded at 3X last year's cash flow ($33 billion), the company's enterprise value ex cash would be about $100 billion. Add Apple's $83 billion of cash to that, and you'd have a market value of about $180 billion, or about $200 per share.

If Apple's stock traded at 15X last year's cash flow, meanwhile, the company's enterprise value ex cash would be about $495 billion. Add the $83 billion of cash to that, and you'd have a market value of about $575 billion, or $600 a share.

In other words, at $400, Apple's stock would appear to have about 50% downside and 50% upside, depending on what you think the company's growth rate will be over the next couple of years.

Now, of course, Apple could completely face-plant over the next few years, in which case the downside would be worse than $200 a share. And, of course, the company's growth could continue to soar, in which case the upside would be far greater than $600. So don't think of this as a capped range of outcomes.

The most likely scenario, meanwhile, seems to be that Apple will continue to grow at a very healthy but declining rate, perhaps seeing some margin pressure from competitors at the same time.

If that is what happens, then Apple stock should rise nicely as its cash flow grows, without seeing an explosive pop to the upside or collapse to the downside.

And that's why Apple's stock seems to be fairly valued--not cheap, not expensive--at $400 a share.

(If anything, given how well-positioned it is for the products of the future--smartphones and tablets--it seems to be a bit undervalued.)